Euro Falls as Greek Leaders Struggle to Form Coalition

Newly-minted 2 cent euro coins fall into a receptacle during manufacture at the Bank of Greece's Printing Works Department and Mint in Athens. The euro fell, extending its longest losing streak in 3 1/2 years, as Greek politicians struggle to form a new government, raising concern that the nation may leave the currency bloc. Photographer: Simon Dawson/Bloomberg

May 9 (Bloomberg) -- The euro weakened against the dollar
for an eighth day, the longest stretch since September 2008, as
Greece’s struggle to form a new government fueled concern the
nation will leave Europe’s currency union.

The 17-nation currency pared losses after officials said
Europe’s bailout fund will pay the next installment of aid to
Greece. The euro fell earlier as Spain’s 10-year bond yields
climbed back above 6 percent. The dollar and yen rose against
most of their major counterparts on increased demand for haven
assets. Canada’s dollar dropped to a three-month low as oil
declined for a sixth day.

“The euro is lower today because of this uncertainty
around Greece,” said Eric Viloria, senior currency strategist
at Gain Capital Group LLC in New York. “There’s been increasing
rhetoric from other European officials with regards to Greece,
saying they need to decide whether or not they’re going to stay
in the euro zone.”

The euro fell 0.5 percent to $1.2942 at 4:04 p.m. New York
time and touched $1.2912, the weakest since Jan. 23. The shared
currency weakened 0.8 percent to 103.06 yen after reaching
102.76, the lowest since Feb. 16. The yen gained 0.3 percent to
79.66 per dollar.

The Canadian dollar fell to C$1.0063, the lowest level
since Jan. 30, before trading down 0.3 percent at C$1.0013. Oil
is Canada’s largest export.

‘Uncertainty in Greece’

Greece’s political turmoil looked set to enter a fourth day
with coalition talks deadlocked, raising the possibility that
another election will have to be held as early as next month.

Evangelos Venizelos, the socialist Pasok leader and former
finance minister, said he’ll try to form a government when he
receives a three-day mandate from President Karolos Papoulias
tomorrow. Pasok today rejected terms for a government set by
Alexis Tsipras of Greece’s anti-bailout Syriza party which then
gave up its bid to build a coalition.

The European Financial Stability Facility’s board of
directors confirmed the release of 5.2 billion euros ($6.7
billion) from a first installment of 39.4 billion euros by the
end of June, the EFSF said in an e-mailed statement today.

“It’s a function of the uncertainty in Greece and the
credit stress in Spain,” said Boris Schlossberg, director of
research at online currency trader GFT Forex in New York. “The
Greeks are not going to do any more austerity. If the Spanish
yield goes to 7 percent, it’s going to be getting into the red
zone -- a warning zone for the euro.”

The yields on Spanish 10-year bonds reached 6.095 percent
today, rising above 6 percent for the first time since April 27.

‘Cannot Force Greece’

Euro area leaders from the European Central Bank’s Joerg
Asmussen to German Finance Minister Wolfgang Schaeuble have
begun to raise doubts that Greece can stay in the monetary
union.

“If Greece decides not to stay in the euro zone, we cannot
force Greece,” German Finance Minister Wolfgang Schaeuble said
at a conference sponsored by German broadcaster WDR in Brussels
today. “They will decide whether to stay in the euro zone or
not.”

Asmussen, a member of the ECB’s executive board, told
Handelsblatt that for Greece “there is no alternative to the
agreed consolidation program if it wants to remain a member of
the euro zone.”

The euro has weakened 3.7 percent over the past six months,
the worst performance among the 10 developed-nation currencies
tracked by Bloomberg Correlation-Weighted Indexes. The dollar
rose 1.2 percent, and the yen dropped 1.3 percent.

Yen, Greenback

The yen strengthened against all of it 16 major
counterparts, and the dollar advanced versus all but the yen,
amid speculation the global economy is stalling, boosting demand
for safer assets.

Growth in German exports slowed to 0.9 percent in March
from 1.5 percent in February, the Federal Statistics Office in
Wiesbaden said today. U.S. initial jobless claims climbed by
4,000 to 369,000 last week, according to a Bloomberg News survey
before the Labor Department report tomorrow.

South Africa’s rand and Mexico’s peso were among the
biggest decliners of the 16 major currencies tracked by
Bloomberg. The rand weakened 1.3 percent to 7.9937 per dollar
and the peso dropped 0.9 percent to 13.4944.

‘Room to Move’

Sales at U.K. stores open at least 12 months, measured by
value, declined 3.3 percent from a year earlier, the London-based British Retail Consortium said today. That’s the biggest
monthly drop since March 2011. Including stores open less than
12 months, sales decreased 1 percent.

Australia’s dollar weakened for a second day versus its
U.S. counterpart after Prime Minister Julia Gillard said
returning the budget to surplus will give the central bank
“maximum room to move” in setting interest rates. The Reserve
Bank of Australia cut interest rates by 0.5 percent to 3.75
percent May 1.

The so-called Aussie weakened 0.7 percent to $1.0055 after
touching $1.0021, the lowest since Dec. 20, the last time it
traded at parity with the greenback.

Dollar Index

The Dollar Index, which IntercontinentalExchange Inc. uses
to measure the currency against those of six major U.S. trade
partners, is approaching its so-called double bottom neckline at
80.18, according to Citigroup Inc. A breakthrough there would
drive the gauge back up to January highs, Tom Fitzpatrick, chief
technical analyst at Citigroup Inc. in New York, wrote in a
research note.

The Dollar Index added 0.4 percent to 80.084, rising for an
eighth straight day in its longest such streak since September
2008. It strengthened to as high as 81.784 in January. It may
also follow a pattern seen in September and appreciate 6 percent
over the next five weeks to 84.5, Fitzpatrick wrote.